A Score that Really Matters: Your Credit Score

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Before they decide on the terms of your mortgage loan, lenders need to discover two things about you: your ability to pay back the loan, and if you are willing to pay it back. To understand your ability to repay, they look at your income and debt ratio. To assess how willing you are to repay, they use your credit score.

Fair Isaac and Company built the original FICO score to help lenders assess creditworthines. You can find out more about FICO here.

Credit scores only assess the info contained in your credit profile. They don't consider income or personal characteristics. Fair Isaac invented FICO specifically to exclude demographic factors like these. "Profiling" was as bad a word when these scores were invented as it is in the present day. Credit scoring was envisioned as a way to assess willingness to repay the loan without considering any other personal factors.

Your current debt load, past late payments, length of your credit history, and a few other factors are considered. Your score is calculated from both the good and the bad of your credit report. Late payments count against your score, but a consistent record of paying on time will improve it.

To get a credit score, borrowers must have an active credit account with six months of payment history. This payment history ensures that there is sufficient information in your credit to build an accurate score. Some borrowers don't have a long enough credit history to get a credit score. They should spend some time building up a credit history before they apply.

Mortgage X Change can answer questions about credit reports and many others. Give us a call: (214) 383-9400.